ALEX BRUMMER: Acting as clean-up crew at Barratt is a task John Allan probably could have done without

John Allan, chairman of Barratt Developments, is becoming something of a legal eagle. The former Deutsche Post finance director and Dixons top honcho was parachuted into the chairman’s seat at Tesco in 2015 after the hurried departures of Phil Clarke and Sir Richard Broadbent. This followed the discovery of a £263m black hole in Tesco’s accounts.

Subsequently, three former Tesco executives have been arrested on fraud charges amid an ongoing Serious Fraud Office inquiry. Now it has all started to go horribly wrong at Britain’s biggest volume housebuilder Barratt.

A regulatory announcement revealed Alastair Baird, the regional managing director for London, has been arrested and suspended from the company after an internal audit discovered ‘misconduct’ in the awarding and managing of contracts.

Building bridges: The experience of the past makes it all the more important that Barratt observes the strictest standards of integrity

Another former Barratt employee, a 47-year old woman, has also been arrested by the Metropolitan Police. Meanwhile, at the High Court a former Barratt person, Michael Neill Fitzpatrick, is involved in a civil action, which claims he was in receipt of ‘secret profits, bribes or commissions’ from sub-contractors.

It is no secret that the construction and housebuilding industries have in the past developed unsavoury relationships with the local officials and contractors with whom they work closely. The most notorious case occurred in 1974 when architect John Poulson was jailed for five years after being found guilty of conspiracy to make or receive corrupt gifts. Most of the recipients were public officials and the case cast a pall over the whole construction sector for many years.

The experience of the past makes it all the more important that the nation’s quoted housebuilders observe the strictest standards of integrity. At a time when Theresa May’s government is seeking to fast track housebuilding because of desperate supply shortages, any events which cast aspersions over the governance of the industry have to be fully probed.

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Investors, for the moment, seem unbothered. But how long before reputational damage starts to hurt the share price? The disclosures also raise questions as to whether a company chairman can be too thinly spread. Allan creditably stepped down as chairman of FTSE newcomer Worldpay when he took on the role at Tesco – which after all is Britain’s flagship global grocer. Acting as clean-up crew at Barratt is a task he probably could have done without.

Wall Street surge

The contrast between the bounce back of the US investment banks and their European counterparts could not be greater. The last quarter was a boom period for Morgan Stanley and Goldman Sachs as well as broader-based American banks with strong brokerage operations including JP Morgan Chase and Bank of America Merrill Lynch.

What a contrast this is with their European counterparts. Deutsche Bank struggles for survival against a slew of negative forces including the US Department of Justice, hedge funds shorting the bank’s shares, a perception of capital weakness and what the International Monetary Fund seems to regard as a broken business model.

Credit Suisse, less in the limelight at present, wrestles with similar problems and UBS has moved from the broader investment banking model to an institution focused on wealth management.

Barclays still has a credible investment bank with a strong client list, great debt management skills and a chief executive in Jes Staley steeped in the industry. But it is too thinly capitalised and continuously seeking to put out regulatory fires ranging from alleged wrong-doing in its foreign exchange department, to the long-running dispute over Middle East funding, to the sub-prime mortgage settlement in the US. It is competing with the New York-based banks with one arm tied behind its back when it might have been better focusing on Africa rather than taking itself off the map.

Morgan Stanley has reported a 61.7 per cent jump in quarterly profits hard on the heels of Goldman Sachs’ 34 per cent lift. Both banks seem to have benefitted from the increased turnover in income from trading bonds, shares, currencies and commodities post Brexit. Turbulence has produced real dividends.

The reality is that they are also benefitting from the diminution of competition as the European players have been knocked out of the reckoning. Having restored their dominance, the US investment banks should be prepared to improve their governance. They could start by playing fairer with clients, as Britain’s Financial Conduct Authority is demanding.

That means no more fiddling of the numbers in performance league tables and giving the smaller guys a look in when it comes to the big initial public offerings. It is unacceptable, as happened with the Royal Mail in the UK, that smaller market players and investors are frozen out because the likes of Goldman deliver preference to sovereign wealth and hedge funds.

Mobile meltdown

The combination of the launch of the iPhone 7 and Samsung’s exploding Galaxy Note 7 has sent Apple shares soaring, and with a market value of £517bn it is top dog in Wall Street once again.

Amid Apple’s resurgence it is mighty curious that the UK’s Laird, a big Apple supplier, lowered its profit guidance. The reaction was a 49 per cent plunge in Laird shares. Bizarre.